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ARTICLE · 27 JULY 2021

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The Democrats' Border Carbon Adjustment Proposal

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On Monday, July 19, 2021, Sen. Chris Coons (D-DE) and Rep. Scott Peters (D-CA-52) introduced The FAIR Transition and Competition Act of 2021 (S. 2378). The bill would, among other things, ...

United StatesEnergy and Natural Resources
Akin Gump Strauss Hauer & Feld LLP
Akin Gump Strauss Hauer & Feld LLP
Clete R. Willems
Clete R. Willems
Gabriel R. Harrison
Gabriel R. Harrison
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Co-authored by Isabel Root (Intern)

On Monday, July 19, 2021, Sen. Chris Coons (D-DE) and Rep. Scott Peters (D-CA-52) introduced The FAIR Transition and Competition Act of 2021 (S. 2378). The bill would, among other things, amend the Internal Revenue Code of 1986, as amended, by establishing a Border Carbon Adjustment (BCA). As proposed, the BCA may be likened to a value-added tax (VAT) and is intended to address the phenomenon known as "carbon leakage," wherein market actors attempt to avoid the cost of greenhouse gas regulations by sourcing products from less regulated jurisdictions. Proponents of border tax adjustments argue that they level the playing field for manufacturers in the United States whose emissions are subject to regulation1. The proposed legislation is expected to be included as part of the Democrats' infrastructure reconciliation package.

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